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Economic growth in South Africa: Getting to the right shade of green

Despite having become increasingly active in the area of green growth policies, and despite having put in place a generally sound environmental policy framework, South Africa needs to improve implementation to meet key environmental challenges. Effective green growth policies should be combined with other structural and macroeconomic policies to reconcile rapid economic growth with environmental sustainability. A key element of such a policy mix is improving price-setting in the key areas of greenhouse gas emissions and water. The South African economy is very carbon-intensive, in part because of implicit subsidies to coal and electricity, while there is as yet no economy-wide carbon price to internalise environmental externalities. More generally, not all instruments to achieve the government’s commitments on emissions abatement are in place, and progress on implementation of the instruments that have been identified has been slow. The monitoring of progress and the verification of coherence between different initiatives should be improved. South Africa is already a water-scarce country, and water stress will worsen with population growth and climate change. The existing policy framework is broadly consistent with best international practice, but implementation has lagged. In general, charges for water need to rise to be increase cost recovery and price scarcity, while the allocation of licenses should be speeded up, municipal management strengthened and illegal water use curtailed.